With the holiday season coming up, we look at the rules around annual leave

Employees and workers rank their entitlement to annual leave as one of the most important benefits that they receive. Employees are entitled to 5.6 weeks’ annual leave per year, which amounts to 28 days per year for those who work five days a week. A part time worker’s allowance is reduced pro rata.

Public holidays can count towards the worker’s entitlement to annual leave. An employer is free to offer more than statutory holiday; the extra holiday will be considered ‘contractual holiday entitlement’. There is no statutory right to bank or public holidays.

However, if the contract says that staff are entitled to ‘28 days’ holiday plus bank or public holidays’ then employees are contractually entitled to take bank or public holidays off. Part time workers who have a contractual right to bank or public holidays have a right to a prorated equivalent of their full time colleagues. 

It doesn’t matter that the part time worker does not normally work on the day on which the bank/public holiday falls. Employees are entitled to a week’s pay for each week of annual leave. For employees with normal, regular, hours of work this generally means their basic salary without any bonus or irregular payments taken into account.

Calculating a week’s pay becomes more complicated where an employee’s pay fluctuates. In these circumstances holiday pay will be based on their average pay during those normal working hours over the previous 12 working weeks. Employers must also exercise caution when dealing with an employee whose remuneration includes commission.

Recently the European Court of Justice (ECJ) found that a salesman paid partly by regular salary and partly by commission should be paid holiday pay that includes commission. In another case, the ECJ found where overtime is offered and expected to be worked that it should be included for the purposes of calculating holiday pay. Where an employee wants to take holiday at an inconvenient time, an employer can serve a counter-notice on an employee to confirm that their holiday request cannot be accommodated.

A counter notice must be given at least as many calendar days before the proposed leave is due to commence as the number of days that the employer is refusing. The law says that unused statutory holiday expires at the end of the holiday year. This means that an employee is not entitled to carry statutory holiday over, or to be paid in lieu of, unused statutory holiday (although there are exceptions for maternity and sick leave).

Employers can sometimes agree that staff may carry over unused holiday into subsequent holiday years, often specifying that carried over holiday is used within a specific period or is otherwise lost. Generally, the only time that employees should be paid for their annual leave is on the termination of their employment.

  • Mark Stevens is a solicitor in the employment team at Veale Wasbrough Vizards. mstevens@vwv.co.uk

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